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Summary:

President Bush has announced the federal government will provide $13.4 billion in emergency loans for Chrysler and General Motors and another $4 billion that will become available in February. If the two auto companies do not prove profitability by March 31, 2009, the government will demand […]

President Bush has announced the federal government will provide $13.4 billion in emergency loans for Chrysler and General Motors and another $4 billion that will become available in February. If the two auto companies do not prove profitability by March 31, 2009, the government will demand immediate repayment. Ford is not seeking immediate aid. Treasury Secretary Henry Paulson will oversee the program — not a “car czar,” as Congress envisioned.

A bailout fact sheet released by the White House and posted on the Wall Street Journal includes a short list of binding terms and conditions (emphasis added). Only one smacks of anything close to a green requirement:

  • Firms must provide warrants for non-voting stock.
  • Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
  • Debt owed to the government would be senior to other debts, to the extent permitted by law.
  • Firms must allow the government to examine their books and records.
  • Firms must report and the government has the power to block any large transactions (> $100 M).
  • Firms must comply with applicable Federal fuel efficiency and emissions requirements.
  • Firms must not issue new dividends while they owe government debt.

In short, the bailout does not give Chrysler and GM get-out-of-jail-free cards, but nor does it push them to achieve long-term viability with real innovation. When it comes to emissions and fuel efficiency, they merely have to abide by the law.

GM’s Fastlane blog has posted a response to President Bush’s announcement (again, emphasis added):

This will allow us to accelerate the completion of our aggressive restructuring plan for long-term, sustainable success. It will lead to a leaner, stronger General Motors, a GM that is:

  • dedicated to great products, exciting design, and world-class quality
  • fully committed to leading in energy-saving vehicles and technologies
  • responsive to the needs of our customers, our stakeholders and the communities we live in and serve

This bailout can keep the automakers afloat for only a few months. That timeline and the limited emissions and efficiency requirements mean the impetus for innovation can only come from the market and company leadership. GM says it’s committed to leading, but the government and public, now investors-in-chief, don’t have a framework for holding it accountable to that pledge. In March, it will be up to the new administration to decide if it wants to take up that task.

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  1. Rather than pile onerous green regulations on the domestic automakers, the U.S. could do what the rest of the world does and raise the Federal gas tax. But Congress seems to be too cowardly to do that, instead foisting the problem on automakers via CAFE standards, or if you are California, via CO2 emission standards.

  2. I don’t think the congress can do that. When all the shots are being called by the oil companies, a gas tax is barely on the cards. The bailout itself is a desperate measure to prevent collapse. California is doing its bit by imposing regulations on auto makers and judging by the flak Arnold had to receive from the auto makers, I don’t think any new regulations or taxes are to follow in the near future.

  3. tinyComb » Blog Archive » » Cleantech Automotive On Fire: Week’s Roundup Sunday, December 21, 2008

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  4. And what about the EV-1 that GM produced in 1996. A 100% electric vehicle that GM leased to a select few in California and Arizona. They were so efficient they threatened GM’s gas guzzling line of vehicles so GM took back each vehicle and destroyed them (in a car crusher). Now we have the Hummer at ~10 mpg. Good call GM. Their award for this is…
    $25 billion in federal loans for manufacturing cleaner cars. Followed by a $17.4 billion bailout.

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    Well… I visit your website first time and found this site very useful.

    Cynthia Kurtz

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